samiksha nagar (Student CA Final) (168 Points)
12 August 2014Hello everyone, can u pls clarify my following queries:
1- in case of software purchase, whether the expenditure incurred for purchase will be treated as revenue expenditure or capital expenditure? if its capital exp. then what will be the rate of dep.? or pls provide me the way to determine whether its a capital exp. or rev. exp.?
2- If an office building is purchased during the year, then whether to claim dep. on it or to show it as an investment? what is more beneficial to assessee?
Sabin Pokharel
(student)
(176 Points)
Replied 12 August 2014
1st question: /experts/depreciation-on-software-265955.asp
2nd question
I don't think purchase of office building can be taken as investment, even for tax purpose. It should be recoreded as fixed assets and depreciation shall be provided on the same. It will be beneficial.
ANUBHAV VISHNOI
(-)
(150 Points)
Replied 13 August 2014
Dear Samiksha
1) It depends on the life or use of software and the benefits to be derived from that. It is generally decided by the management taking into consideration all the facts. Sometime management also consider the value for capitalization. Capital expenditure is considered when the benefit is going to accrue for the period of more than one year. Minimum dep rate is 40% under companies act but it also depends on the management to take higher rate according to the nature and circumstances.
2) Definitely if the building is used for official purpose then dep will be claimed. Bcoz asset is not held for the purpose of value appreciation. If an asset is exclusively used for official purpose not for appreciation then it cannot be said that particular asset is held for investment purpose.
If a spare building has been purchased only for investment purpose or value appeciation then it can be treated as an investment. (Check AS-10)
Hope this will help you
Regards
Anubhav Vishnoi
(8750089567)
CAclubindia
